PFENEX INC. Forward-Looking Statements
The following discussion and analysis should be read together with our consolidated financial statements and the notes to those statements included elsewhere in this Form 10-Q. This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our management's beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in the section entitled "Risk Factors" and this Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements include, but are not limited to:
• the sufficiency of our cash and cash equivalents and cash generated from
operations to meet our working capital and capital expenditure needs for
the next 12 months;
• the performance of our collaboration partner Alvogen, upon which we are
dependent on to commercialize the FDA-approved PF708 product;
• our reliance on Jazz Pharmaceuticals Ireland Ltd. (Jazz), Alvogen Malta
Operations Ltd. (Alvogen), China NT Pharma Group Company Ltd. (NT Pharma),
Merck & Co., Inc. (Merck), Serum Institute of India Private Ltd. (SIIPL)
and any future collaboration partner's performance over which we do not
have control;
• our expectations regarding the potential impacts on our business, access
to capital, supply chain, preclinical programs and clinical trials of the
novel coronavirus (COVID-19) pandemic;
• our and any potential future collaboration partner's ability to enroll
patients in our clinical studies at the pace that we project;
• our expectation to expand our product pipeline;
• our expectations regarding the initiation, timing, progress and the
success of the design, primary and secondary end points, and duration of
the clinical trials and planned clinical trials and studies for our
current product candidates and reporting results from same;
• whether the results of our and our collaboration partners' trials and
studies will be sufficient to support domestic or global regulatory
filings and approvals for PF708, and whether and when we are able to
obtain an "A" therapeutic equivalence designation for the FDA-approved
PF708 product relative to the reference drug Forteo;
• our and our collaboration partners' ability to maintain regulatory
approval of the FDA-approved PF708 product or seek and obtain regulatory
approval for PF708 and our other product candidates, and if approved,
maintain regulatory approval and the timing of such potential regulatory
approvals;
• our expectations with respect to the commercialization of the FDA-approved
PF708 product by Alvogen;
• our reliance on third-parties to conduct clinical studies;
• our reliance on third-party contract manufacturers and Alvogen to
manufacture and supply the FDA-approved PF708 product, PF708 and our other
product candidates for us;
• the benefits of the use of the FDA-approved PF708 product, PF708, or any
of our other product candidates;
• the rate and degree of market acceptance of the FDA-approved PF708
product, PF708 or any of our other product candidates, if approved for
sale;
• regulatory developments in the United States and foreign countries;
• our expectations regarding government and third-party payor coverage and
reimbursement;
• our and our collaboration partners' ability to manufacture the
FDA-approved PF708 product, PF708 and our other product candidates in
conformity with regulatory requirements and to scale up manufacturing of
the FDA-approved PF708 product, PF708 and our other product candidates to
commercial scale;
• our ability to successfully build a specialty sales force, or collaborate
with third-parties including our existing collaboration partners, Alvogen
and NT Pharma, to commercialize the FDA-approved PF708 product, PF708 and
our other product candidates;
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• our and our collaboration partners' ability to compete with companies
currently producing the reference products, including Forteo;
• our ability to compete with companies that may also seek and obtain
approval for therapeutically equivalent versions of Forteo;
• our ability to retain and recruit key personnel, including development of
a sales and marketing function;
• our ability to obtain and maintain intellectual property protection for
the FDA-approved PF708 product, PF708, our Pf?nex Expression Technology®
or any other product candidates;
• our estimates of our expenses, ongoing losses, future revenue, capital
requirements and our needs for or ability to obtain additional financing;
• our expectations regarding the market size, size of patient populations,
and growth potential for the FDA-approved PF708 product, PF708 and our
product candidates, if approved for commercial use;
• our estimates of the expected patent expiration timelines for Forteo and
other branded reference drugs and biologics;
• our ability to develop new products and product candidates;
• our ability to successfully establish and successfully maintain
appropriate collaborations and derive significant revenue from those
collaborations;
• our financial performance; and
• developments and projections relating to our competitors and our industry.
Forward-looking statements include statements that are not historical facts and
can be identified by terms such as "anticipates," "believes," "could," "seeks,"
"estimates," "expects," "intends," "may," "plans," "potential," "predicts,"
"projects," "should," "will," "would," or similar expressions and the negatives
of those terms. Forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from any future results, performance,
or achievements expressed or implied by the forward-looking statements. We
discuss these risks in greater detail in Part II, Item 1A, "Risk Factors,"
elsewhere in this Form 10-Q filed with the
Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. You should read this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.
This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.
Pf?nexTM, Pfenex Biopharmaceuticals™, the Pfenex Biopharmaceuticals logo, and Pf?nex Expression Technology® are among our primary trademarks. Other trademarks referred to in this Form 10-Q are the property of their respective owners.
In this Form 10-Q, "we," "us" and "our" refer to
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Overview
We are a development and licensing biotechnology company focused on leveraging our proprietary protein production platform, Pf?nex Expression Technology®, to develop next generation and novel protein therapeutics to meaningfully improve existing therapies and create novel therapies for some of the biological targets linked to critical diseases still waiting to successfully be addressed. We have extensive experience in protein therapeutic development and our proven platform enables deliberate and rapid candidate selection, fast drug development, and potentially higher success rates for a wide range of complex modalities. We aim to leverage existing drug development successes into a broad pipeline that is diversified across multiple assets, including an FDA-approved product and next generation and novel biopharmaceutical product candidates.
In
Our other product candidates and collaborations include PF743 (JZP-458), which
we are developing in collaboration with Jazz Pharmaceuticals for the treatment
of acute lymphoblastic leukemia (ALL) or lymphoblastic lymphoma and which
commenced a pivotal Phase 2/3 clinical study in
In the third quarter of 2019, we added PF810, a peptide based next generation
therapeutic, to our wholly owned pipeline. PF810 is currently in preclinical
development. In addition, we have established a strategic collaboration with
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Our FDA-Approved Product, Our Product Candidates and Collaborations
The following summarizes certain information about the FDA-approved product that we developed, our pipeline candidates, and collaborations:
Our FDA-Approved Product,
Product Candidates and Branded
Collaborations Reference Drug Program
FDA-Approved PF708 Product Forteo® • Approved in the United States;
licensed to Alvogen
PF708 Forteo® • Product candidate in EU, MENA,
and Rest of World licensed to
Alvogen (excluding areas licensed
to NT Pharma)
• Product candidate in Mainland
China, Hong Kong, Singapore,
Malaysia, Thailand licensed to NT
Pharma
Hematologic Oncology Product N/A • PF743 (JZP-458) - Recombinant
Candidates Erwinia asparaginase
• PF745 (JZP-341) - Long-acting
recombinant Erwinia asparaginase
• PF690* - pegaspargase
Peptide based next N/A • PF810
generation therapeutic
Arcellx sparX programs N/A • PF753
• PF754
*Jazz retains an exclusive option to license this product pursuant to certain option triggers.
In pursuit of novel wholly-owned product candidates, we have also established a collaboration with a third-party technology platform company that is screening our selected, validated biological targets with its novel binding modality library in an effort to identify potential lead product candidates. Those candidates will be transferred to us and could become wholly owned product candidates developed by us.
FDA-Approved PF708 Product
In
The FDA approval of the FDA-approved PF708 product was supported by data from Study PF708-301, which compared the effect of PF708 and Forteo in osteoporosis patients. The PF708-301 study enrolled a total of 181 patients, with 90 patients receiving PF708 and 91 patients receiving Forteo. Eighty-two patients completed the study in the FDA-approved PF708 product treatment group, compared with 81 patients in the Forteo treatment group. The primary study endpoint was anti-drug antibody (ADA) incidence after 24 weeks of drug treatment. 2.2% (2/90) of patients who received PF708 and 2.2% (2/91) of patients who received Forteo had detectable antibodies to teriparatide, and one of the two patients who received PF708 developed neutralizing antibodies to teriparatide. The secondary study endpoints included mean percentage changes in lumbar-spine bone mineral density (BMD) and median percentage changes in bone turnover markers (BTM) after 24 weeks of drug treatment, as well as pharmacokinetic (PK) parameters for up to four hours after the first dose. Safety endpoints were incidences of adverse events (AE) and serious adverse events (SAE).
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The PF708-301 study showed comparable overall profiles between PF708 and
Forteo across multiple endpoints. These results from the PF708-301 study, along
with bioequivalence findings from Study PF708-101 in healthy subjects, supported
the PF708 NDA submitted in
In addition to obtaining FDA approval of PF708, we have been continuing our
efforts to obtain an "A" therapeutic equivalence designation for the product
relative to its reference drug, Forteo. A determination of therapeutic
equivalence (as shown by an "A" rating) may permit the FDA-approved PF708
product to be automatically substituted for Forteo, depending on applicable laws
and policies within each of the 50 states in the
The comparative use HF study was a simulated use study intended to evaluate the
effect of each product's delivery device and user interface on critical task
performance by untrained osteoporosis patients and caregivers. The study used a
paired design of the FDA-approved PF708 and the Forteo products and included
both naïve and Forteo experienced users. On
For a discussion of certain significant risks relating to the FDA-approved PF708 product, please see the following Risk Factors: "The FDA-approved PF708 product, PF708 and our other product candidates, if approved, face significant competition from the reference products and from therapeutic equivalent products of the reference products, and from other products. Our or our collaboration partners' failure to effectively compete may prevent us from achieving significant market penetration and expansion." and "If the FDA-approved PF708 product does not receive an "A" therapeutic equivalence designation from the FDA, our business may suffer."
In
Alvogen submitted a centralized application to the
In
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We may also be eligible to receive double-digit royalties on net sales of PF708. NT Pharma is responsible for any further development required to achieve regulatory approval as well as commercialization activities in the applicable territories.
In accordance with regulatory requirements we provided notice of Paragraph IV
certification (Notice Letter) to Eli Lilly and Company (Lilly) on
In
Effective
Jazz Collaboration - multiple hematologic oncology product candidates - In
CRM197 - We have both licenses and supply agreements in place for CRM197, which
is a non-toxic mutant of diphtheria toxin. CRM197 is a well-characterized
protein and functions as a carrier for polysaccharides and haptens, making them
immunogenic. We have developed unique CRM197 production strains based on our
Pf?nex Expression Technology platform. As a result of our development efforts,
we previously entered into commercial licenses for production strains capable of
producing CRM197 with both Merck and SIIPL. Merck and SIIPL are using the CRM197
produced via the licensed production strain in multiple clinical stage and
pre-clinical product candidates. The clinical stage product candidates include
Merck's 15-valent pneumococcal conjugate vaccine, PCV-15 (V114), currently in
several ongoing Phase 3 clinical studies, and SIIPL's 10-valent pneumococcal
conjugate vaccine, Pneumosil®, which achieved WHO Prequalification in
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Additional Biosimilar, Novel Vaccine and Other Pipeline Product Candidates - Our
pipeline includes biosimilar candidates to certain reference products, including
biosimilar candidates to Lucentis (PF582) and Neulasta (PF529) and two novel
anthrax vaccine candidates, Px563L and RPA563, which are funded by the
To date, PF708 is our only FDA approved product under the 505(b)(2) regulatory pathway, with Forteo as the reference drug. Our product candidates are enabled by our patented protein production platform, Pf?nex Expression Technology, which we believe confers several important competitive advantages compared to traditional techniques for protein production, including the ability to produce complex proteins with higher accuracy and greater degree of protein purity, as well as speed and cost advantages. The development of proteins requires several competencies which represent both challenges and barriers to entry. Due to their inherent complexity, proteins require the use of living organisms to efficiently produce them at a large scale. Traditional techniques for protein production employ a trial and error approach to production organism, or strain, selection and process optimization, which is inherently inefficient and typically produces suboptimal results. This historically inefficient process provides barriers to creating or replicating complex proteins, adds significant time to market and results in the high cost of goods typical of biologic therapeutics. Together, these limitations pose significant hurdles for companies interested in entering the market with novel biologics, biosimilars and therapeutic equivalents. Our platform utilizes a proprietary high throughput fully automated parallel approach, which allows the construction and testing of thousands of unique protein production strains in parallel, thereby allowing us to produce and characterize complex proteins while reducing the time and cost of development and long-term production.
The potential market opportunities for our most advanced product candidate,
PF708, are substantial. We have developed PF708 as a therapeutic equivalent
candidate to Forteo, which achieved global product sales of approximately
Our revenue for the three months ended
As of
As we continue to develop and invest more resources into the development and
commercialization of our product candidates, our net operating losses may
increase over the next several years. Research and development expenses will
continue to be material as we incur further costs of development. We are
currently developing our wholly owned therapeutics, establishing additional
product development partnerships, and investigating and targeting novel
modalities for possible future lead candidates, and we do not yet have an
extensive sales organization. We will need substantial additional funding to
support our operating activities, especially as we approach anticipated
regulatory approval in
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Recent Developments COVID-19 Pandemic
The novel coronavirus outbreak of COVID-19 has had and likely will continue to
have significant effects on businesses and health care institutions around the
world. While it is not possible at this time to estimate the overall impact that
the COVID-19 pandemic could have on our business, the continued rapid spread of
COVID-19, both across
The health and safety of our people and their families continues to be our
primary focus. As the COVID-19 pandemic has developed, we have taken numerous
steps to help ensure the health and safety of our employees and their families.
We are maintaining social distancing and enhanced cleaning protocols and usage
of personal protective equipment, where appropriate. Since the stay at home
order was put in place in the state of
We have been actively monitoring our supply chain during the COVID-19 pandemic, including third party materials and service suppliers for us as well as our partners. To date, there have not been any known supply disruptions due to the pandemic, but contingency planning is ongoing with our partners to reduce the possibility of an interruption to manufacturing or the availability of necessary materials.
In
COVID-19 has also caused volatility in the global financial markets and threatened a slowdown in the global economy, which may negatively affect our ability to raise additional capital on attractive terms or at all.
We are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations. For additional information on the various risks posed by the COVID-19 pandemic, refer to Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10 Q.
PF708 Comparative Use Human Factors Data
On
NT Pharma Deed of Assignment and Amendment
Effective
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Critical Accounting Policies, Significant Judgments and Use of Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
Results of Operations
Comparison of the three months ended
The following table summarizes our net loss during the periods indicated:
Three Months Ended
March 31,
(in thousands, except percentages) 2020 2019 Change
Revenue $ 682 $ 7,862 (91 )%
Cost of revenue 340 1,566 (78 )%
Gross profit 342 6,296 (95 )%
Operating expense
Research and development 5,811 7,880 (26 )%
Selling, general and administrative 4,732 4,543 4 %
Total operating expense 10,543 12,423 (15 )%
Loss from operations (10,201 ) (6,127 ) 66 %
Other income, net 50 69 (27 )%
Net loss $ (10,151 ) $ (6,058 ) 68 %
Revenue
Our revenues to date have been generated primarily through collaboration and license agreements. Our collaboration and license agreements frequently contain multiple elements including (i) intellectual property licenses and development services, and (ii) products. Consideration received under these arrangements may include upfront payments, research and development funding, cost reimbursements, milestone payments, payments for product sales and royalty payments. Our customers include Alvogen, NT Pharma, Jazz, Arcellx, and BARDA.
Three Months Ended
March 31,
(in thousands, except percentages) 2020 2019 Change
Revenue $ 682 $ 7,862 (91 )%
Revenue decreased by
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Cost of Revenue
Three Months Ended
March 31,
(in thousands, except percentages) 2020 2019 Change
Cost of revenue $ 340 $ 1,566 (78 )%
Cost of revenue decreased by approximately
Research and Development
Three Months Ended
March 31,
(in thousands, except percentages) 2020 2019 Change
Research and development $ 5,811 $ 7,880 (26 )%
Research and development expenses decreased by approximately
We expect research and development expenses to vary in the near future depending on the phase of the programs we are advancing. The timing and amount of expenses incurred for our product candidates will depend largely upon the outcomes of current or future clinical studies for our product candidates, as well as the related regulatory requirements, manufacturing costs and any costs associated with the advancement of our preclinical programs.
Selling, General and Administrative
Three Months Ended
March 31,
(in thousands, except percentages) 2020 2019 Change
Selling, general and administrative $ 4,732 $ 4,543 4 %
Selling, general and administrative expenses increased by approximately
Liquidity and Capital Resources
To date, we have funded our operations primarily through the sale and issuance
of common stock in our public offerings, revenue from our collaboration
agreements, government contracts, service agreements, and reagent protein
product sales, our prior credit facility and the private placement of equity
securities. At
In
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In
In
In
On
In
We believe that our existing cash and cash equivalents and our cash inflow from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for product development and commercialization sooner than planned. We currently have no credit facility or committed sources of capital although we may receive milestone and other contingent payments under our current license and collaboration agreements. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates and the extent to which we may enter into additional agreements with third parties to participate in their development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials. Our future capital requirements will depend on many factors, including:
• the timing and extent of spending on our research and development efforts;
• our ability to enter into and maintain collaboration, licensing,
commercialization and other arrangements and the terms and timing of such
arrangements;
• our ability to retain Alvogen as a collaboration partner for the
FDA-approved PF708 product and PF708 on commercially acceptable terms;
• the timing of the marketing authorization for PF708, if any, in
jurisdictions outside the United States ;
• whether we and Alvogen obtain, in a timely manner or at all, an "A"
therapeutic equivalence designation for the FDA-approved PF708 product
that may allow such product to be automatically substituted for Forteo
depending on applicable laws and policies within each of the 50 states;
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• the cost to us of development, manufacturing and commercialization
activities for PF708 and our other product candidates, if any;
• the cost of preparing, filing, prosecuting, defending and enforcing any
patent claims and other intellectual property rights;
• the receipt of any collaboration or milestone payments;
• the scope, rate of progress, results and FDA acceptance of the results,
and cost of our clinical trials, preclinical testing and other related
activities for our product candidates;
• the emergence of competing technologies or other adverse market developments;
• the time and costs involved in seeking and obtaining regulatory and
marketing approvals in multiple jurisdictions for our product candidates
that successfully complete clinical trials;
• the introduction of new product candidates and the number and
characteristics of product candidates that we pursue;
• the timing, receipt and amount of sales, profit sharing or royalties, if
any, from the FDA-approved PF708 product, PF708, and any other potential
products;
• the degree and rate of market acceptance and coverage and reimbursement by
payors of the FDA-approved PF708 product, PF708 and any of our other
product candidates launched by us or our collaboration partners; the
impact of any natural disasters or public health crises, such as the
COVID-19 pandemic;
• the potential expansion of our sales and marketing activities; and
• the potential acquisition and in-licensing of other technologies, products
or assets.
If we were to experience any delays or encounter issues with any of the above,
including with respect to obtaining an "A" therapeutic equivalence designation
for the FDA-approved PF708 product, Alvogen's commercial launch of the
FDA-approved PF708 product in the
We may need to raise additional capital to fund our operations in the near
future. Funding may not be available to us on acceptable terms, or at all and
our ability to raise additional capital may be adversely impacted by potential
worsening global economic conditions and the recent disruptions to and
volatility in the credit and financial markets in
Cash Flows
The following table sets forth the primary sources and uses of cash, cash equivalents and restricted cash for each of the periods presented below:
Three Months Ended
March 31,
(in thousands) 2020 2019
Net cash (used in) provided by:
Operating activities $ (8,656 ) $ (10,338 )
Investing activities (1,433 ) (111 )
Financing activities 20,067 (17 )
Net increase (decrease) in cash, cash equivalents and
restricted
cash $ 9,978 $ (10,466 )
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Net cash used in operating activities
Net cash used in operating activities was
Net cash used in investing activities
Net cash used in investing activities was
Net cash provided by financing activities
Cash provided by financing activities was
Off-Balance Sheet Arrangements
In the normal course of business, we enter into contracts and agreements that
contain a variety of representations and warranties and provide for general
indemnifications. Our exposure under these agreements is unknown because it
involves claims that may be made against us in the future but have not yet been
made. As of
Contractual Obligations and Commitments
There have been no material changes during the three months ended
Recently Adopted Accounting Pronouncements
In
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